Arbitration has become increasingly popular among Canadian businesses as civil litigation costs spike. This alternative dispute resolution (ADR) method not only helps businesses and individuals save money, but also has the advantage of bringing about a resolution more swiftly in many cases. However, the groundbreaking case, Heller v. Uber Technologies Inc. (“Uber“), as well as the Supreme Court of Canada’s 2020 ruling that a court may depart from the general rule of deferring to an arbitrator if the dispute resolution clause is invalid, have left the future of arbitration clauses somewhat precarious, particularly as they apply in an employment context. Indeed, following the Uber decisions, many deplored the difficult task of drafting an enforceable arbitration clause in employment contracts.
However, Ontario courts have been trending toward upholding the enforceability of arbitration clauses in employment contracts post-Heller v. Uber. For example, recent Superior Court and Court of Appeal decisions unanimously found an employment contract’s arbitration clause to be enforceable. Moreover, the courts have specifically distinguished many cases from the Uber decision, despite certain similarities.
What is Arbitration?
In arbitration, like civil litigation, the parties each present their case and then relegate all decision-making authority to a third party. In both cases, the decision maker’s ruling, whether it be a judge or arbitrator, is final and binding on the parties. Arbitration allows for greater flexibility than litigation in terms of process and scheduling, and can often be completed much more quickly.
The distinctions between civil litigation and arbitration are numerous, yet some of the key differences include the following:
- Parties may choose their arbitrator, whereas parties are assigned a judge in civil litigation.
- Arbitration confers privacy as well as confidentiality to disputing parties, whereas most litigation procedures are public.
- Parties in arbitration have more extensive control over the legal procedure.
- Challenging an arbitration award is rare and is only allowed under very limited circumstances, whereas court rulings are appealable based upon a question of law to the Court of Appeal, and eventually to the Supreme Court.
Arbitration Clause Enforced Under the Employment Standards Act
In the recent Ontario Court of Appeal decision, Leon v. Dealnet Capital Corp., the Court addressed the many questions and concerns regarding the enforceability of arbitration clauses in employment contracts following Uber. The May 19th decision was rendered in a case using the Uber decision to attack the enforceability of an employment agreement’s arbitration clause.
The plaintiff, John Leon, argued that the arbitration clause in his employment contract was invalid based on the Court of Appeal for Ontario’s decision in Uber. More precisely, he maintained that the arbitration clause barred him from making complaints about perceived violations of the Employment Standards Act to the Ministry of Labour, in violation of s. 5(1) of the ESA. Leon argued that because the arbitration clause was in violation of the ESA, the clause itself was invalid and therefore unenforceable.
Legal Jurisdiction and Applicability of the Employment Standards Act Were Key Factors to Distinguish Case from Uber
The Court of Appeal highlighted an important distinction between the two cases. The impugned arbitration clause in the Uber decision involved a choice of foreign law provision ostensibly created to avoid the operation and jurisdiction of the ESA. In contrast, the Court of Appeal pointed out that, “Leon’s Employment Agreement is subject to Ontario law, and it expressly recognizes the primacy of the ESA over the terms of the Employment Agreement itself.” This element is crucial, as the Court’s decision, therefore, focuses on the enforceability of the arbitration clause under the jurisdiction of the ESA, an issue that was not addressed by the Supreme Court in Uber.
The Court also underscored that the Governing Law Clause of the employment contract expressly preserved employee rights under the ESA. Notably, the arbitration clause did not eliminate Leon’s right to make a complaint to the Ministry of Labour, as the employment agreement expressly granted primacy to the ESA. The Court of Appeal further distinguished this case from Uber, in that the current arbitration clause was a term in an employment contract involving a senior executive; in Uber, on the other hand, the issue involved a contract of adhesion that was deemed unconscionable as it compelled vulnerable workers to pay large costs in order to resolve disputes overseas under foreign law.
When is a Court Likely to Uphold an Arbitration Clause in an Employment Contract?
In light of the Court of Appeal’s decision in Leon v. Dealnet Capital Corp., arbitration clauses in employment contracts that are under the jurisdiction, authority and primacy of the ESA and Ontario law are likely to be found enforceable. Further, their enforceability has not been diminished by the Supreme Court ruling in Uber. Indeed, Ontario courts have seemingly taken a strict approach when applying Uber to other arbitration clause disputes: where the clauses are under the jurisdiction of Ontario law, a critical aspect of the Uber decision becomes irrelevant and is therefore distinguishable from the Supreme Court ruling.
Contact the ADR Lawyers, Mediators & Arbitrators at Tierney Stauffer LLP in Ottawa, Kingston, Arnprior & Cornwall
Contact the litigation and dispute resolution lawyers at Tierney Stauffer LLP if you are interested in exploring your options to pursue an employment matter through alternative dispute resolution, dispute an arbitration clause, or require the services of a professional mediator or arbitrator. Our firm has extensive experience representing clients in in various dispute resolution processes to obtain the most desireable result in each case. Call us at 1-888-799-8057 or contact us online to discuss your matter with a member of our team.